TaxTMI 
TaxTMI 
2006 (3) TMI 255
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....hase and sales effected on 10th March, 2003 were neither certified by the auditor in his audited report nor such trading account had been filed during the course of survey. (2) Detailed copy of purchase and sales exceeding Rs. 5,00,000 showed the details of purchases/sales but do not give the description of goods, date of purchase, price rate, weight or quality, mode of payment and receipts. The AO called for the same vide letter dt. 10th March, 2003. The details of the debtors from whom interest was not charged and the creditors to whom the interest was not paid was required by the AO vide notice under s. 142(1) dt. 1st Oct., 2002, but these details were not filed. Therefore, the claim of the interest had not been verified properly by the AO. (3) The creditors were required to attend personally but none of them was produced which resulted in non-verification of the identity of the creditor, genuineness of the deposit and the source of deposit. The assessee gave a detailed reply, which ran in 9 pages and was dt. 21st Feb., 2005 and ultimately submitted that the assessment order is neither erroneous nor prejudicial to the interest of the Revenue and, therefore, prayed for the ....
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....be satisfied with twin conditions, namely. the order of the AO sought to be revised is erroneous and is also prejudicial to the interest of the Revenue. In case one of the above conditions is absent, say, if the order of the AO is erroneous but is not prejudicial to the interest of the Revenue or vice versa, recourse to s. 263 of the Act cannot be taken. The words 'prejudicial to the interest of the Revenue', have not been defined but legally it is well settled that they only mean that order should not have been passed in accordance with the provisions of law, in consequence thereof the lawful revenue, due to the state, has not been realised or cannot be realised. Likewise, the expression "erroneous" has not been defined in the Act. But its plain meaning is that the term 'erroneous' involves error or deviation from law. Therefore, an assessment order made by complying the provision of law cannot be branded as erroneous by the CIT simply because according to him the same should have been passed or framed in a different manner. 5. In the case of Malabar Industrial Co. Ltd. vs. CIT, the Hon'ble Supreme Court had an opportunity to deal with the issue and the Court observed that the ....
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....Kar). The Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. has also held that when the AO opted for one between the two courses permitted in law and it has resulted in loss of revenue, as two views are possible and the AO has taken one view to which the CIT does not agree, it cannot be treated as erroneous or prejudicial to the interest of the Revenue unless the view taken by the AO is unsustainable in law. According to the decision of the Hon'ble High Court in the case of Garden Silk Mills Ltd. vs. CIT (1996) 135 CTR (Guj) 399 : (1996) 221 ITR 81 (Guj), if the AO passed an order in consonance with the law laid down by the binding decision of the Hon'ble jurisdictional High Court against which the Department contemplated to file special leave petition or the same may have already been filed but without any result, it cannot be said that the AO's order is erroneous so as to entitle the CIT to exercise his revisionary powers. 7. After the satisfaction of the CIT, as stated above, an opportunity of personal hearing has to be given to the assessee. The CIT also must serve upon the assessee, a show cause notice, in writing, stating therein as to how the order of the A....
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....d each and every factual detail had been examined very finely by the learned AO during assessment proceedings. On the other hand, the learned Departmental Representative, Shri K.C. Solanki has controverted the above contention of the learned Authorised Representative and has reiterated the reasonings given by the CIT in the impugned order. 12. In this case, undeniably, the assessee had filed return of income for asst. yr. 2000-01 along with audit report in Form No. 3CD and statements of trading and P&L a/c. Besides the above, the assessee also filed balance sheet and other details. Subsequently, in respect of query dt. 23rd Sept., 2002, the assessee also furnished the required information/explanation, copies of accounts and other evidences. The AO must have examined all the cash credits, 'arath' account, bank statement and every aspect of income and expenditure before passing the assessment order. Now, we will take up each and every ground taken in the show-cause notice issued under s. 263 to decide as to whether revisionary jurisdiction can be assumed by the CIT in the given facts and circumstance of this case or not. 13. From the available record, it is evident that the ass....
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.... the receipts and payments of interest from and to the different parties. 15. After going through the two examples given by the CIT relating to accounts of Shri Mukesh Kumar in whose account, the assessee has claimed the payment of interest of Rs. 56,000 but according to CIT when the assessee has been maintaining the accounts on mercantile basis, the assessee has first to apply interest on the credit amount on the date of purchase of goods and has to charge interest on the debit balance upto the date when the amount has not come back from there. The CIT concluded that the assessee had claimed excess interest of Rs. 38,052. 16. The reply of the learned Authorised Representative that the interest was credited to the account of Shri Mukesh Kumar on his opening credit balance of Rs. 3,09,504 as on 1st April, 1999 and that interest was not chargeable. Only transactions of purchase and sale of Rs. 4,45,810 were debited and credited to his account, as the party denied having made such purchase and sale. In our opinion, the CIT has tried to calculate the receipts and payments of interest as per his requirements and has ignored the method followed by the assessee. Likewise, in the cas....
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....ness were submitted. With regard to other creditors, who were classified in three categories, by the entries and the full particulars of each of them had also been given, most of the creditors being old creditors/trading creditors. Therefore, it cannot be stated that the AO had not applied his mind. The assessee had filed before the AO confirmed copies of account from the creditors showing the deposits made by them. They were regular accounts and they made deposits by way of account payee cheques. Copies of all the documents are placed at pp. 45 to 61 of the paper book. When the creditors were verifiable from their accounts, it could not be stated that the identity, their creditworthiness, and genuineness of the transactions is not proved by their personal attendance. The only known assessee creditor is Shri Hari Ram. In relation to him, copy of account, photostat of account-payee cheque, affidavits of the depositor dt. 17th Nov., 2001, photostat of joint account of the depositor showing the credit balance upto Rs. 5,00,000 and even after the encashment of cheque and photostat of death certificate are such over-whelming pieces of evidence which speak clearly in support of the asses....